One often-overlooked control opportunity for an organization is the eyes and ears of its employees. By some accounts, over one-third of all organizations that fail do so as a result of theft or fraud. Yet 80 percent of companies have few procedures in place to protect them from fraudulent behavior.
Most people associate whistleblower policies with large, publicly-traded companies that are required to adhere to various regulations and laws. But there is a place in privately-owned and not-for-profit organizations for the implementation of such programs.
Not only is fraud more damaging to smaller companies, but the opportunities to commit fraud are generally greater due to lax or absent policies and controls, less direct oversight, and fewer checks and balances. Issues most often encountered are improper billing; misappropriation of cash or other company resources; theft of property, equipment, or inventory; violation of local, state, and federal laws; and fraudulent financial reporting.
Implementing some form of a whistleblower policy can help mitigate the risk and potential damages associated with improper behavior in the workplace. Some best practices in rolling out a program include:
- Developing a code of conduct and expectations for employees that outline their responsibilities to disclose concerns.
- Setting a tone at the top that makes it clear you do not condone unethical behavior.
- Having procedures in place to communicate concerns:
- To a Human Resource department representative, or
- To a designated member of the management group, or
- Via an independent telephone hotline.
- Encouraging employees to report concerns, not complaints.
- Not calling it a whistleblower policy. This phrase connotes a negative image and divisive feeling. It should be called something like an Employee Concern Policy or Issue Identification Policy.
Owners and management are charged with protecting the tangible assets and reputation of their businesses. Internal controls, surprise audits, and utilizing your external accountants all help accomplish this goal. But think how much more effective it would be if you had all your employees on the watch.
Stephen W. Christian is a director at Kreischer Miller. Contact him at Email or 215.441.4600.
You may also like: